High rates stall property sector

ZIMBABWE’S property sector is expected to remain largely stagnant due to the high inflation and interest rates.

Ana
lysts say the future of the sector remains bleak unless the inflation rate stabilises and interest rates become viable.

Property development flourishes well in economies that have less that 10% inflation rate. Zimbabwe has the highest inflation rate in the region at 314%.

Boysen Mutembwa, a director with Bard Real Estate, says the fact that there hasn’t been any meaningful property development in the city indicates that all is not well.

He said the market has not grown over the past four years owing to the unstable economic condition.

“The property market has not witnessed any growth. Of course the rentals have been increasing but that is not how we judge growth,” said Mutembwa.

“We judge growth by the number of units that are being developed. As for the increase in the rentals, that is purely inflationary.”

The number of stalled construction projects bears testimony to the gloom that pervades the sector.

The financiers of the Joina Centre have found the going tough since inflation and interest rates took their bite some four years ago. There are other projects that have been abandoned.

Investors are currently scared to commit their funds to new projects because of the economic instability.

“If one builds a complex they will be lucky to get half of the building’s replacement costs if they sell it,” said an evaluator with a local real estate company. He said in the current conditions an analysis of rental fees and replacement value shows that the returns are exceptionally low compared to other countries.

“Rentals contributions are still not a significant factor in considering the viability of a construction venture. This is because they are still very low.”

The current lack of progress has also worsened the infrastructural problems that have stalled development since Independence. Added to this is the issue of water problems that continue to haunt the city.

There is also the nightmare that developers face when they want to get a Zesa connection.

Meanwhile, the current problems in the financial sector have seen a significant increase in the vacancy rate.

There are offices and premises that have been left by companies that are down sizing, reorganising and even shutting down completely.

Old Mutual, the biggest property owners in Zimbabwe, have of late been flighting adverts in the papers for offices.

This is in contrast to the period before the monetary policy when CBD offices were virtually choked up due to demand.